PG&E; Takes $1.1-Billion Write-Off

California’s electricity crisis again zapped earnings at PG&E; Corp., which on Wednesday reported a $1.1-billion write-off of electricity and other costs that resulted in a $951-million net loss for the first quarter.

The San Francisco company’s problems centered on its beleaguered utility arm, Pacific Gas & Electric Co., which on April 6 filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code. The parent firm and a profitable sister company, National Energy Group, did not file for bankruptcy protection.

The skyrocketing wholesale electricity prices at the heart of the state’s energy crisis prompted PG&E; to take a $4.1-billion after-tax charge for the fourth quarter of 2000.

“It’s hard to put into words how disappointed we all are that this California energy mess continues to have such a negative impact on our reported financial results,” Robert D. Glynn Jr., PG&E; chairman and chief executive, told analysts during a conference call.

The first-quarter net loss amounted to $2.62 per share. A year ago, PG&E; posted first-quarter net income of $280 million, or 77 cents per share.

PG&E; said it took the $1.1-billion after-tax charge against earnings because accounting rules require such an action if the company cannot show that it is likely to recover those costs.

For the first quarter, the charge primarily represented wholesale electricity costs that could not be passed on to customers because of a retail rate freeze.

The wholesale electricity costs were incurred by the utility, the California Independent System Operator and the California Department of Water Resources, which in mid-January began buying power on behalf of Pacific Gas & Electric and the state’s other debt-ridden utility, Edison International unit Southern California Edison.

Glynn said PG&E; should not be responsible for such costs and continues to attempt to recover them.

A PG&E; lawsuit asking a federal judge to order California energy regulators to raise consumer rates was dismissed later in the day. U.S. District Judge Ronald Lew dismissed the suit, which sought to force the California Public Utilities Commission to raise rates, but said PG&E; could later refile. He said the suit was premature because the PUC hasn’t made a final decision on the utility’s request for higher rates.

Excluding the charge, PG&E;’s income from operations slipped to $243 million, or 67 cents per share, from $284 million, or 78 cents, in the first quarter of 2000.

“It’s a pretty lackluster performance,” said Paul Patterson, utility analyst with Credit Suisse First Boston. “Clearly, the utility itself is not doing that well, and it’s no surprise with all that is going on.”

Pacific Gas & Electric reported income from operations of $192 million, or 53 cents per share, compared with $228 million, or 63 cents, in the year-ago quarter.

National Energy Group, PG&E;’s energy trading and power plant building arm, posted operating earnings of $54 million, or 15 cents per share, in the first quarter, little changed from the $56 million, or 15 cents, in the first quarter of last year. The group reserved $19 million, or about 1% of revenue, because of money owed it for electricity sold into California, PG&E; said.

PG&E; said it expects earnings from operations to grow 8% to 10% this year, excluding electricity cost charges and expenses from the recent $1-billion refinancing of corporate debt.

Pacific Gas & Electric also said it has lined up enough natural gas to meet summer demand and is withdrawing a request that state regulators force Sempra Energy unit Southern California Gas Co. to acquire supplies for the utility.

PG&E; shares lost 4 cents to close at $8.96 on the New York Stock Exchange.

Bloomberg News was used in compiling this report.